"Property must have an owner." Yuliy Yusupov on why Uzbekistan needs the privatization of state assets

"Property must have an owner." Yuliy Yusupov explained why Uzbekistan needs the privatization of state assets

The continuation of the privatization of state property is an extremely necessary measure for Uzbekistan, believes independent economist and academic director of the Center for Economic Development Promotion, Yuliy Yusupov. At the same time, he emphasizes that the transparency and competitiveness of public auctions must be radically increased.

It is reported that under the new privatization program in Uzbekistan, state shares in 84 business entities, 1,242 real estate properties, and about 8,000 hectares of land will be put up for auction. The total value of the offered assets is estimated at 100 trillion soums. In particular, the state intends to sell 98.9% of shares in Turonbank, 91.83% of "Uzexpocentre," and 79.27% of the International Cooperation Center. The insurance company Xalq Sug’urta, the Tashkent Passenger Carriage Construction and Repair Plant, the Andijan Mechanical Plant, and a number of other enterprises are subject to 100% privatization.

Assessing the scale of the assets being put up for auction, Yusupov noted that the state still owns shares in many enterprises and financial institutions operating in potentially competitive sectors that should function as private commercial organizations.

"The current dominance of state ownership is extremely harmful to economic development, as the state is a poor owner and a poor manager, especially in the absence of effective mechanisms of public control over officials managing state enterprises. Property must have a real owner who is vitally interested in the efficient use and multiplication of this property," the expert stated.

According to him, the presence of state-owned companies hinders the formation of a healthy market environment.

"Competition in a market economy, as is well known, is the main driver of economic development and ensuring competitiveness. Until we radically reduce the state's share of participation in ownership and economic processes, Uzbekistan's economy cannot be considered a market economy. Therefore, the continuation of privatization is of such great importance for the country," he emphasized.

Separately, the economist pointed out the importance of improving the rules of sale. The proposed incentives, in his opinion, are useful because they reduce costs and facilitate access for potential buyers to the auctions. However, the key issue remains their fairness.

Yusupov links the need for reforms to the negative experience of previous stages of privatization, when serious questions arose regarding the conditions and transparency of transactions.

In particular, the expert recalled the sale of the state share in Coca-Cola Uzbekistan.

Initially, the asset was planned to be sold for about $70 million, but after revising the terms and conducting an open auction, the share was sold to the Turkish Coca-Cola İçecek for $252.28 million. This case is indicative of how much the final price can rise in the presence of real competition.

Opposite examples are the sales of state shares in Perfectum and Uzcard. Despite initial plans to put them up for public auction, the assets were transferred to private co-owners at their appraised value. Questions were also raised by the privatization of 85.58% of shares in JSC "Foton," sold for 151 billion soums through a public invitation to negotiations.

"Taking into account previous experience and the problems that arose, it is necessary to provide additional mechanisms that make public auction processes more transparent and competitive," Yusupov believes.

To eliminate abuses, the expert suggests implementing a number of fundamental steps. First, the auction rules must be formulated in advance and remain unchanged throughout the process. Second, the sole criterion for determining the winner must be the maximum price offered for the asset.

In addition, Yusupov advocates for the complete abandonment of additional investment and social obligations for buyers, as they create corruption risks and provide a pretext for subsequent revision of transaction results. It is also necessary to completely eliminate the practice of non-competitive transfer of state property to private co-owners at appraised value. Finally, a key condition for fair auctions remains continuous public control — from the approval of regulations to the consideration of appeals — by parliamentarians, experts, business associations, and civil society.

"Let's hope that the planned privatization will be successful and will be carried out in conditions of full transparency, ensuring equal access for all potential buyers, in fair competition," Yuliy Yusupov concluded.